Friday, March 29, 2024

Binxi not only Blue Sky suitor

Neal Wallace
A takeover offer by Chinese-backed NZ Binxi (Oamaru) Foods is not the only offer being considered by Southland processor Blue Sky Meats.
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The company earlier this year employed Auckland consultants BDO to provide business options for Blue Sky and the $2.20 a share offer from NZ Binxi was the “first out of the blocks”, chairman Scott O’Donnell said.

“They are not the only party talking to us.”

The offer valued the company at $25.3 million, a significant premium on its market capitalisation value of $15m.

O’Donnell said the process of formally documenting the takeover offer, board consideration of its merits and finally making a recommendation to shareholders could take four to six weeks.

He stressed the board’s priority was to add value to the company for shareholders and it had a range of options including how to improve its performance through to sale.

Blue Sky was formed in 1987 and operated a single chain sheep meat works at Woodlands, east of Invercargill, processing up to 30,000 stock units a week.

In December 2014 it bought a beef-processing plant near Gore. In total it employed more than 350 people.

Former company chairman Graham Cooney wrote in the most recent annual report that Blue Sky faced a number of issues.

It appeared addressing them was the catalyst for the outside assessment of the business and subsequently the Binxi offer.

In the report for the year to March 31, Cooney said both plants were underused, which contributed to a $1.9m after-tax loss, a $3m turnaround on the previous year’s result.

That was despite revenue increasing from $102m to $124m though costs rose from $100m to $126m.

Part of that loss was the closure last spring of the beef plant for an upgrade at the same time there was heavy demand for killing space from a heavy cow cull.

Cooney also wrote that the sheep meat plant was underused and unprofitable as it tried to balance costs by remaining loyal to suppliers seeking killing space at peak times.

New, experienced procurement staff had been appointed and steps taken to improve relationships with farmers.

Equally, the company added to its costs during the year by agreeing to pay cartage and third-party procurement costs for some suppliers.

“This model is a flawed one in that it leads to the wrong industry decision-making but it is accepted that it is the environment that the company works in.”

Cooney also wrote that a small company like Blue Sky needed to find more and bigger niche markets and improve the marketing of its products.

O’Donnell said in an interview there were a “few hundred” shareholders but five owned more than 55% of the company.

They were led by Lowe Corporation with 17.95%, HW Richardson Group, 14.43%, Blue Star Corporation, 11.25%, Cooney and his wife Jill, 9.54%, and Aucklander David Gray, 2.49%.

Last December Binxi took its 25% stake in an Oamaru meat works to outright ownership by buying out Lean Meats.

Binxi was wholly owned by Heilongjiang Binxi Cattle Industry Company from Harbin in China.

The parent company was founded in 2005 to fatten, slaughter and process about 200,000 cattle a year for domestic and export markets.

As well it had interests in bio-engineering, feed processing and organic fertiliser production.

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